Assessment & Audit Under GST Act

Audit & Assessment Under GST Act

Assessment in GST is mainly focused on self-assessment by the taxpayers themselves. Every taxpayer is required to self-assess the taxes payable and furnish a return for each tax period. A supplier will find out the extent of his tax liability which he has to discharge on a continuous and regular basis only after assessment.

Assessment and Audit

What Is Assessment?

As per Sec 2(11), Assessment means a determination of tax liability under the GST Act and includes:

  • Self-assessment
  • Re-assessment
  • Provisional assessment
  • Summary assessment and
  • Best judgment assessment

Self-Assessment (Sec 59)

Every person registered under GST Act shall self-assess the tax payable by him for a tax period and after such assessment, he shall file the return for each tax period required under Section 39.

Provisional Assessment (Sec 60)

  • Application For Provisional Assessment

Provisional assessment can be sought where a taxable person is unable to determine:
→ Value of goods or services or both to be supplied by him or
→ The rate of tax is applicable to the goods or services to be supplied by him.

He may furnish an application in the prescribed form stating reasons for payment of tax on a provisional basis along with documents. The proper officer may issue a notice to the registered person to furnish additional information or documents in support of his request and the applicant shall file a reply or may appear in person before the officer.

The proper officer shall issue an order within 90 days from the receipt of such request, allowing payment of tax on provisional basis indicating:
→ At such rate or value specified by him and
→ The amount for which the bond is to be executed and security is to be furnished, not exceeding 25% of the amount covered under the bond.

  • Furnishing Of Security

The payment of tax on a provisional basis may be allowed if the taxable person issues a bond in the prescribed form along with a security in the form of a bank guarantee for an amount as the proper officer may deem fit. This binds the taxable person for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed.

  • Finalization of Provisional Assessment

The final assessment order has to be passed by the proper officer within 6 months from the date of communication of the order of provisional assessment. However, on sufficient cause being shown and for reasons to be recorded in writing, the above period may be extended:
→ By the Joint / Additional Commissioner for maximum 6 months
→ By the Commissioner for a maximum of 4 years.

This, a provisional assessment can remain provisional for a maximum of 4 years.

 CASE I – Where tax liability as per the final assessment is higher than in provisional assessment:

→ The registered person is liable to pay interest on tax payable on the supply of goods or services or both under provisional assessment but not paid on the due date specified under Sec 39(7) or the rules made thereunder.
→ The rate under Sec 50(1) will be applicable i.e. 18% from the first day after the due date of payment of tax till the date of actual payment, whether such amount is paid before or after the issuance of an order for final assessment.

 CASE II – Where tax liability as per the final assessment is less than in provisional assessment:

→ The registered person shall be paid interest at the rate specified in Sec 56 i.e. 6% from the date immediately after the expiry of 60 days from the date of receipt of application as mentioned in Sec 54(1) till the date of refund of such tax.
→ Subject to the eligibility of refund and absence of unjust enrichment.

  • Release Of Security

The applicant may file an application for the release of security furnished after the issue of the final assessment order. The proper officer shall release the security after ensuring that the applicant has paid the amount specified in the final order and issue an order within a period of 7 working days from the date of receipt of the application

Scrutiny Of Returns (Sec 61)

  • Verifying the correctness of the return

The return furnished by a registered person may be selected for scrutiny by the proper officer to verify its correctness and the proper officer may scrutinize the same with reference to the information available with him.

  • Issue of Notice

In case any discrepancy is found during scrutiny of return, the proper officer shall issue a notice to the said person, informing him of such discrepancy and seek an explanation on the same maximum within 30 days from the date of service of such notice or such further period as may be permitted by him. And where possible, he shall quantify the amount of tax, interest, and other amounts payable in relation to such discrepancy.

  • Reply to Notice

The registered person to whom notice is issued may within 30 days of being informed by the proper officer (or such further period as permitted by him):
→ Accept the discrepancy and pay tax, interest and other amount mentioned or
→ Submit his explanation regarding the non-acceptance of the discrepancy.

  • Action by Proper Officer

Where a satisfactory explanation is sought, no further action will be taken. But the proper officer may initiate appropriate action under Sec 65 or Sec 66 or Sec 67 and proceed to determine the tax and other dues under Sec 73 or Sec 74 if:
→ No satisfactory explanation is furnished by the registered person or
→ The registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted.

Assessment Of Non-filers Of Returns (Sec 62)

  • Best Judgement Assessment

Notwithstanding anything to the contrary in Sec 73 or Sec 74, where a registered person fails to furnish the return under:

→ Section 39 (Monthly/ quarterly return) or
→ Section 45 (Final return on cancellation of registration)
→ A notice under Section 46 issued by the proper officer to the defaulting taxable person requiring him to furnish the return within a period of 15 days.

In the above cases, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered.

  • Time Limit for Assessment Order

The Assessment Order shall be issued by the Proper Officer within a period of 5 years from the date specified under Section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

  • Withdrawal of Assessment Order

Where the registered person furnishes a valid return within 30 days of the service of the assessment order mentioned above, the said assessment order shall be deemed to have been withdrawn but the liability for payment of:

→ Interest under Sec 50(1) @ 18% or
→ Late Fee under Sec 47 (Rs. 100/- per day subject to maximum Rs. 5,000/-)

Shall continue.

Assessment Of Unregistered Person (Sec 63)

  • Best Judgement Assessment

Notwithstanding anything to the contrary in Sec 73 or Sec 74:
→ Where a taxable person fails to obtain registration even though liable to do so or
→ Whose registration has been canceled under Section 29(2) but who was liable to pay tax,
The proper officer may proceed to assess the tax liability of the said unregistered person to the best of his judgment for relevant tax periods.

  • Issue of Notice

The proper officer shall issue a notice to the taxable person containing the grounds on which the assessment is proposed to be made on best judgment basis and shall also serve a summary of the same electronically and after 15 days’ time to furnish a reply, pass an order and upload a summary of the same electronically. However, no such assessment order shall be passed without giving the person an opportunity of being heard.

  • Time Limit For Assessment Order

The assessment order shall be issued by the proper officer within a period of 5 years from the due date for furnishing the annual return for the financial year to which non-payment of tax relates.

When can Summary Assessment be made?

Summary Assessment can be initiated to protect the interest of revenue with the previous permission of Additional Commissioner / Joint Commissioner when:

→ The proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act and
→ The proper officer has sufficient grounds to believe that delay in passing an assessment order may adversely affect the interest of the revenue.

Withdrawal of Assessment Order

The Summary Assessment may be withdrawn by Additional Commissioner / Joint Commissioner:

→ The proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act and
→ The proper officer has sufficient grounds to believe that delay in passing an assessment order may adversely affect the interest of the revenue.

Where he finds such order to be erroneous and may instead follow the procedures laid down in Section 73 or Section 74 to determine the tax liability of such taxable person.

Deemed taxable person in case of the supply of goods

Where the taxable person to whom the liability pertains is not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section.

  • Who May Conduct The Audit?

→ The Commissioner or
→ Any officer authorised by him, by way of a general or a specific order
May undertake audit of any registered person at the place of business of the registered person or in their office for a financial year or part thereof or multiples thereof, where it is decided to undertake the audit of a registered person, the proper officer shall issue a notice minimum 15 working days prior to the conduct of audit.

  • The Time Limit For Completion Of The Audit

The audit is required to be completed within 3 months from the date of commencement of audit. The period is extendable for a further period of a maximum of 6 months by the Commissioner.

Commencement of audit, here, means:

→ The date on which the records and other documents, called for by the tax authorities, are made available by the registered person or

→ The actual institution of audit at the place of business,

Whichever is later.

  • How to conduct the Audit?

During the course of the audit, the authorized officer may require the registered person to:
→ Facilitate the verification of accounts/ records available or requisitioned by the authorities
→ Provide such information as the authorities may require for the conduct of the audit and
→ To render assistance for timely completion of the audit.

The proper officer may inform the registered person of the discrepancies noticed, if any, as observations of the audit and the said person may file his reply.

  • Finalization of Audit

The proper officer shall finalize the findings of the audit after due consideration of the reply furnished by the registered person. The proper officer shall within 30 days inform the registered person whose records are audited about the findings, his rights and obligations, and the reasons for such findings. Where the audit results in detection of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilized, the proper officer may initiate action under Sec 73 or Sec 74.

• When special audit may be directed and from whom:

If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any officer not below the rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of the revenue:
→ Is of the opinion that the value has not been correctly declared or
→ The credit availed is not within the normal limits

He may, with the prior approval of the Commissioner issue a direction to the registered person to get his records including books of accounts examined and audited by a Chartered Accountant or Cost Accountant as may be nominated by the Commissioner and specified in their said direction. The provisions of the special audit shall have an effect even if the accounts of the registered person have been audited under any other provisions of the GST Act or any other law for the time being in force.

  • The time limit within which audit to be completed:

The Chartered Accountant or Cost Accountant as nominated by the Commissioner shall submit a report of such audit duly signed and certified by him within a period of 90 days to said Assistant Commissioner mentioning such other particulars as may be specified.

The Assistant Commissioner may extend this period by a further period of 90 days:
→ on an application made to him in this behalf by the registered person or the Chartered Accountant or Cost Accountant or
→ for any material and sufficient reason.

  • Who will bear the expenses of the audit?

The expenses of the examination and audit of records including the remuneration of such Chartered Accountant or Cost Accountant shall be determined and paid by the Commissioner and such determination shall be final.

  • How the Special Audit Report to be dealt with?

The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.

  • Consequences if tax not paid or short paid:

Where the special audit results in detection of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilized, the process of demand and recovery will be initiated against the registered person under Sec 73 or Sec 74.

Form No. Description
GST ASMT 01 Application for Provisional Assessment
GST ASMT 02 Additional Documents or Details demand by Proper officer against ASMT 01
GST ASMT 03 Reply file against ASMT 02
GST ASMT 04 Order Pass to Allow for Provisional Assessment
GST ASMT 05 For execute the bond and furnish the security through a bank guarantee
GST ASMT 06 Calling of Information by the proper officer for Final Assessment
GST ASMT 07 Final Assessment Order
GST ASMT 08 Application for release of security from the proper officer
GST ASMT 09 Order pass for releasing of security
GST ASMT 10 Notice of discrepancies occurred at the time of Scrutiny of Returns
GST ASMT 11 Reply against ASMT 10
GST ASMT 12 Intimation by the proper officer against reply filed in ASMT 11
GST ASMT 13 Order of Assessment as per Section 62
GST ASMT 14 Notice for making the best judgment Assessment
GST ASMT 15 Order of Best Judgment Assessment after giving an opportunity of being heard
GST ASMT 16 Order of Summary Assessment made under Section 64
GST ASMT 17 Application for Withdrawal of the summary Assessment
GST ASMT 18 An order passed against ASMT 18
GST ADT-01 Notice to the registered person for intimating about Audit.
GST ADT-02 Inform the findings of the Audit by the proper officer to the registered person
GST ADT-03 Notice about special audit to the registered person
GST ADT-04 Inform the findings of the Audit by the proper officer to the registered person

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